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Council report shows Museum café behind forecast

Council report shows Museum café behind forecast

At a meeting of Rotorua District Council’s Operations & Monitoring Committee yesterday [15 May] the council called for a detailed review of the Museum Café operation within the next six months with a view to considering leasing the business to the private sector.

The decision followed presentation of a report on the financial performance of the Museum Café which shows it tracking behind forecast after nine months of the current financial year.

The report reveals the museum café was achieving a reasonable return on funds at 21%, but behind the 36% return estimated in the original business case prepared when the operation was purchased.

However the council says a number of measures are being developed to improve the café’s performance and bring it back on track.

The report, prepared by council finance manager Thomas Collé and chief financial officer (CFO) Dave Foster shows earnings (before interest, taxes, depreciation, and amortisation) for the nine months were $39,133 compared to a budget of $69,750.

The shortfall was primarily caused by wage costs being significantly ahead of budget, although that was slightly offset by a higher gross surplus from trading.

CFO Dave Foster said revenue was expected to be $10,000 under budget at the end of the financial year but the gross margin remained on track with the budget.

“At the current rate of earnings, it would take just under six years to achieve a full return on the funds the council invested to purchase the business, lease and chattels, compared to the business case estimate of approximately two and a quarter years.

“However a number of measures to improve the café’s overall financial performance are currently being reviewed, including staffing levels, opening hours, product wastage and pricing.

Mr Foster said getting the operation back on track and its returns up to expected levels would require only a marginal increase in sales, combined with a decrease in staffing costs.

“Under that scenario, the café could improve its annual return on funds to 36%, and this would provide a full return of funds invested within a three and a half year period.”

Mayor Steve Chadwick said the council was taking a wider look across all current operations and would be assessing whether they should continue to be involved in running businesses like the café.

“The progress report on the café’s current financial performance confirms what many of us thought at the time when the business was purchased on a decision made by the then-Executive Committee of Council. However we’ve moved on since then and I’ll ensure such important decisions will in the future be made by only the full council.”

[ENDS]


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